Excerpt from today's AFR:The Canadian stoush comes as Wyloo...

Excerpt from today's AFR:


The Canadian stoush comes as Wyloo builds strategic stakes in the nickel miners that supply BHP’s Kalgoorlie nickel smelter: Western Areas and Mincor.

Wyloo’s interest in Western Areas was revealed in August just days after IGO Group and Western Areas initiated merger talks.

IGO declined to elaborate on those merger talks yesterday as it published a record $549 million full-year profit.

But IGO managing director Peter Bradford revealed some of the strategic rationale for combining the two companies when answering analyst questions about whether the company still planned to build a nickel sulphate processing plant.

Mr Bradford said IGO did not have enough mine life at the Nova nickel mine to warrant a $530 million investment in a nickel sulphate plant, but he signalled the plan could be revived if IGO had 10 years of mine life.

‘‘It is something that sits permanently on the backburner bubbling away, but we really need the catalysts around longer dated nickel sulphide supply to be able to look at that more aggressively,’’ he said. ‘‘We were looking for 10 years of supply.’’

The reference to needing 10 years of supply to warrant investment in a nickel sulphate plant highlights the potential of a merger with Western Areas, which expects the first nickel ore in the next month from its Odysseus mine, which will have ‘‘at least’’ 10 years of life.

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Ash here.

If the synergies of a merger are that attractive - turning IGO from a concentrate seller into a nickel sulphate producer - IGO can bloody well pay up. It will be a paper bid, so the question becomes, how much paper?

Ash